* Brokerage execs say fiduciary rule may increase costs
* Potential rule could reduce client investing choice
* Executives want clear guidelines on potential rule
NEW YORK, Nov 8 Brokerage executives are
worried that a higher standard of care for brokers will curtail
investor choice and increase the cost of financial advice.
Executives told attendees at the Securities Industry and
Financial Markets Association's annual meeting on Monday that a
fiduciary standard requiring anyone giving personalized
financial advice to put their clients' interests first may have
"Our primary concerns are providing investors with choice
and being able to do it in a cost effective way," said James
Allen, Chairman and Chief Executive Officer of regional
brokerage firm Hilliard Lyons.
The Dodd-Frank Act directed the Securities and Exchange
Commission to conduct a six-month study into whether anyone
providing personalized financial advice should be brought under
a uniform fiduciary standard. Currently brokers must only meet
a lower "suitability" standard.
Chet Helck, Raymond James Financial's (RJF.N) Chief
Operating Officer, said the practical implications of such a
standard need to be spelled out.
He pointed to the example of a client who had sold his
business and kept a large amount of stock in his company. Even
if the client wanted to stay invested in his former company,
would a financial adviser be obligated to tell him to diversify
his holdings because it is safer, Helck asked.
"A very strict interpretation could not accommodate
activities that a client wants," said Helck.
There is also a concern that the increased regulatory
burden under a fiduciary standard will force brokers to charge
more for financial advice, which may make it too expensive for
some smaller investors, said Kent Christian, President of the
Financial Services Group at Wells Fargo (WFC.N) Advisors.
"For clients who fit a certain profile and below, it may be
difficult for the firm to continue to serve them profitably,"
(Reporting by Helen Kearney; Editing by Jackie Frank)